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Unformatted text preview: Chapter 21Inventory Management: Economic Order Quantity, JIT, and the Theory of Constraints MULTIPLE CHOICE 1. Which of the following is NOT a cost readily identified with inventory management? a. cost of selling inventory b. cost of not having stock on hand c. cost of holding inventory d. cost of acquiring inventory ANS: A PTS: 1 OBJ: 21-1 2. Which of the following is NOT an example of an ordering cost? a. receiving costs b. salesmen's salaries costs c. clerical costs of preparing documents d. insurance costs on shipment ANS: B PTS: 1 OBJ: 21-1 3. The cost of preparing equipment and facilities so they can be used to produce a particular product or component is known as: a. ordering costs. b. setup costs. c. carrying costs. d. inventory costs. ANS: B PTS: 1 OBJ: 21-1 4. The cost of holding inventory is known as a. ordering cost. b. setup cost. c. stock-out cost. d. carrying cost. ANS: D PTS: 1 OBJ: 21-1 5. Which of the following is NOT considered a carrying cost? a. insurance on the inventory b. the opportunity cost of funds invested in inventory c. storage costs d. receiving costs ANS: D PTS: 1 OBJ: 21-1 6. Which of the following is NOT an opportunity cost associated with inventory management? a. lost sales to customers b. use of capital tied up in inventory investment c. cost of expediting d. all are opportunity costs ANS: C PTS: 1 OBJ: 21-1 This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. This may not be resold, copied, or distributed without the prior consent of the publisher. 7. Which of the following costs are considered in the EOQ model? a. ordering costs b. selling costs c. carrying costs d. both a and c ANS: D PTS: 1 OBJ: 21-1 8. The ordering of small, frequent orders a. minimizes stockout costs. b. minimizes ordering costs. c. minimizes carrying costs. d. minimizes all three. ANS: C PTS: 1 OBJ: 21-1 9. Inventory management identifies an economic order quantity that a. minimizes the total costs of ordering and carrying inventory. b. maximizes the stockout costs. c. minimizes the costs of ordering. d. maximizes the cost of carrying inventory. ANS: A PTS: 1 OBJ: 21-1 10. Air Frame Corporation increased the size of several inventory order quantities that had previously been determined using the EOQ model. What is the impact on the total annual ordering costs? a. increase b. no change c. decrease d. cannot be determined ANS: C PTS: 1 OBJ: 21-1 11. Which of the following equations determines the total annual ordering costs? a. Cost of placing an order times the order quantity. b. Cost of placing an order times the number of orders per year. c. Cost of placing an order times one-half of the order quantity....
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